When a contingency must be accrued under IFRS, the charge is referred to as
A)an extraordinary loss
B)a provision
C)an appropriation
D)a risk expense

Question

Quizplus · Accepted Answer

Under IFRS, a contingency that meets certain criteria (such as a present obligation arising from a past event, it is probable that an outflow of resources will be required to settle the obligation, and a reliable estimate can be made of the amount) must be accrued as a provision. Provisions are charges against profit, and they are recorded on the balance sheet as a liability. Option A is not correct as there is no concept of extraordinary items under IFRS. Option C is not correct as appropriations relate to the allocation of profits, not charges against profit. Option D is not a recognized term under IFRS.

When a Contingency Must Be Accrued Under IFRS, the Charge